Ceilings on lending rates remain a widely-used instrument in many EMDEs as well as developed economies. The economic and political rationale for putting ceilings on lending rates is to protect consumers from usury or to make credit cheaper and more accessible. Our recent working paper shows that at least 76 countries around the world, representing more than 80% of global GDP and global financial assets, impose some restrictions on lending rates. These countries are not clustered in specific regions or income groups, but spread across all geographic and income dimensions.
Developing countries made considerable gains during the 2000s, resulting in a large reduction in extreme poverty and a significant expansion of the middle class. More recently that progress has slowed—and the prognosis is for more of the same, given an environment of lackluster global trade, a lack of jobs coupled with skills mismatches, greater income inequality, unprecedented population aging in richer countries, and youth bulges in the poorer ones. As a result, developing countries are unlikely to close the development gap anytime soon.